Policy paper

FCDO response to the Independent Commission for Aid Impact recommendations on UK aid to Ukraine

Published 15 August 2024

The government welcomes the Independent Commission for Aid Impact’s (ICAI) rapid review of UK aid to Ukraine. We welcome ICAI’s recognition that the UK’s overall support for Ukraine since the full scale in invasion by Russia has been an effective and flexible response to the crisis. We also welcome and accept all the recommendations that ICAI has made, which will help further strengthen the UK’s support for Ukraine.

Our response to the recommendations stated in the ICAI report are outlined below.

Recommendation 1

FCDO should intensify its support for localisation of the coordination and delivery of the humanitarian response in Ukraine.

Response: Accept

Civil society organisations (CSO) were among the first to respond to the full-scale invasion in 2022 and have remained key actors in the humanitarian response. They are often close to, or from affected communities, and have a good understanding of needs in hard-to-reach locations. The UK’s humanitarian programme has supported United Nations (UN), Red Cross, International Non-Governmental Organisations (INGOs) and Ukrainian civil society, all of whom have a role to play in supporting localisation. The UK has also championed ensuring Ukrainian actors are able to sustain their support and increasingly have a strong voice in the response and in international fora, including the Ukraine Recovery Conference in London in 2023.

FCDO is committed to supporting Ukrainian humanitarian actors in their response to meet the needs of people across the country, and will continue to do so through our programming, influencing and advocacy. We will continue to enhance our efforts on localisation, supporting Ukrainian humanitarian civil society and volunteer groups to sustain their responses, through enabling access to UK funding with complementary support to ensure responders are working as safely as possible, and through capacity strengthening and support to develop humanitarian technical expertise. We take a long-term view to supporting Ukraine to develop domestic humanitarian capability to handle shocks in the future, supporting systems strengthening work with the Government of Ukraine, and for community-level support through, for example, our partnership with the Ukrainian Red Cross.

We are also committed to ensuring the diverse voices of civil society – from across the country, as well as representing marginalised groups and people with specific needs – are promoted and incorporated into humanitarian planning and response.

Recommendation 2

The design of future FCDO programmes should encompass programming options for different scenarios and the ability to adapt quickly when circumstances change. 

Response: Accept

At programme level, all (new and existing) programmes are building in the flexibility to make modest adjustments either if priorities change or if more resources become available. Our programmes also have mechanisms to ensure that they regularly review priorities, and we conduct regular scenario planning exercises to anticipate and consider the programmatic implications of potential shifts in context, dynamics and risks. Some programmes, such as the Partnership Fund for a Resilient Ukraine (PFRU), are explicitly designed to be adaptive, while others are more focused on ensuring sufficient flexibility exists in their implementation approaches, including options to rebalance across different programme components as required.

At portfolio level, we have identified four priority thematic areas where we expect to focus our support flexibly to the evolving context on the ground: 1) economic recovery, 2) social recovery, 3) energy and 4) humanitarian response. For the associated programmes we will build in room for more significant uplifts if circumstances require it (e.g. recent energy security attacks), if additional resources become available or when patterns of need change. These thematic areas have been selected as they offer a broad representation of portfolio priorities, because they have components that would continue to offer comparable value for money even if uplifted or reduced, and because, if necessary, uplifts/reductions could be managed without additional human resources. This approach will also allow us to make significant adjustments to the balance of spend across the portfolio as a whole if needed.

Recommendation 3

FCDO should strengthen its third-party monitoring and audit arrangements in Ukraine by adding specialist capacity to identify and investigate fraud, corruption and diversion risks to UK aid (including guarantees) across the country portfolio.

Response: Accept

Within the current financial year, we will continue to use Third Party Monitoring (TPM) services from our existing contract. This TPM will continue to conduct field-visits and remote verification of project delivery for high-value programmes (e.g. humanitarian and energy). Under the current TPM contract, in-kind assistance is being verified, to identify and/or assure against aid-diversion. Alongside this, implementing and downstream partner policies, awareness and reporting of fraud will also continue to be checked.

From next financial year onwards, FCDO is designing a follow-on TPM programme, to service its expanding portfolio of ODA programming in Ukraine. A key focus of this programme will be to continue to provide assurance against aid-diversion and fraud, particularly for higher-risk, higher-value programmes operating in hard-to-reach areas of Ukraine.

In terms of audit arrangements, we will continue to ensure that partners adhere to relevant fiduciary rules. Our existing partners (e.g. multilateral agencies) already have audit arrangements in place and reporting on these audits will continue to be an FCDO requirement. For any new partners, our due diligence process will be used to identify weaknesses in fiduciary risk management systems prior to signing agreements. If weaknesses are identified but mitigation is possible, programme management staff will work directly with such partners to ensure an appropriate audit approach is agreed and implemented. TPM will then be used to further assure against aid-diversion and fraud during project implementation.

The FCDO continues to be assured of the robust processes and controls our partner the World Bank Group has in place for identifying and reporting fraud, corruption and fiduciary risk for the UK’s loan guarantees. We will continue to work closely with them in delivering the remainder of our Ukraine fiscal support commitment which runs to 2027. All World Bank Group funds are subject to audit, which provides an independent audit opinion on internal controls, and that includes funds in trust funds and financial intermediary funds. In 2023, the Multilateral Organisation Performance Assessment Network (MOPAN) assessed World Bank anti-fraud and corruption procedures to be ‘strong’. For its operations in Ukraine, the World Bank has also engaged an external auditor to conduct an audit of Agreed Upon Procedures (AUP), which scrutinised and enhanced these processes, in particular by conducting deep dives into a sample of anonymised individual level transactions for budget support. Redacted copies of these reports are publicly available on the World Bank Group’s website.

Recommendation 4

Based on lessons from other post-conflict settings, FCDO’s new anti-corruption programming should include a focus on helping Ukraine’s independent anti-corruption bodies to identify and manage corruption risks associated with large-scale reconstruction.

Response: Accept

Ukraine’s anti-corruption system has remained operational and effective throughout the war, but we recognise that the scale of funds needed for reconstruction carries increased risk of corruption. We are working with Ukraine’s national-level institutions to prepare for this by supporting the National Anti-Corruption Prevention Agency (NACP) to implement Ukraine’s Anti-Corruption Strategy. This includes working with key ministries to implement anti-corruption controls and compliance as well as working with 75 sub-national administrations that will be at the forefront of the recovery, to manage corruption risks relating to reconstruction. We will ensure this work continues under our successor anti-corruption programme that is envisaged to begin implementation by April 2025.

At the same time, we will continue to use our diplomatic influence to provide oversight and push for anti-corruption reform. We will also continue to champion a comprehensive response to fighting corruption by supporting open government data, open procurement, digital transformation and transparent reconstruction through use of Digital Restoration EcoSystem for Accountable Management (DREAM), which provides end-to-end transparency on the planning, selection, procurement, and delivery of all reconstruction projects. We will also continue to support civil society including investigative journalists, who play a critical role in ensuring accountability.